Personal loans are flexible borrowing options. They can be used of any purpose as the lenders put no restriction on the ways of using these loans. The UK loan market is very diversified and thus offers varied lucrative schemes and deals on personal loans, in accordance to the season. Personal loans are of two types, mentioned below.

Secured personal loans- These loans demand the borrower to pledge his home as collateral to the lender in lieu of the loan amount. These loans attract low interest rates and considered to be the most cost-effective and profitable borrowing options available in the loan market. Since the risk involved for the lender is low due to the presence of the property that he can repossess in case of default on the loan repayment, the lender offers flexible repayment terms. These repayment options may include attractive schemes like accelerated repayments, repayment holidays, deferred repayments etc. The borrower may also have a choice among the rate of interest. He can choose from capped, variable and fixed rate of interest.

Unsecured personal loans- These loans don't require the borrower to pledge anything for getting the loan. The lender checks the credit record of the borrower and in accordance offers him unsecured loan. The amount, loan tenure, and APR charged depends on the credit score of the borrower and the credit policies of the lender. Generally, the amount granted for these Personal loans ranges in between £5000 to £25,000. The loan tenure for unsecured loans stretches in between 6 months to 10 years. Unsecured loans always attract higher interest rates than secured loans because the risk involved for the lender is high in the first case.

The borrower can choose from secured and unsecured loans in accordance to their preference and needs. If the financial requirement is huge and you have security to offer, secured loan is a logical choice. However, if you don't have asset to offer as security to the lender, you have no choice but to go for an unsecured loan.